Transportation & Logistics Analysis

Road transportation: a promising market for investment funds

Overall, investment funds have shown relatively little interest in road freight transportation. A cyclical yet promising sector, as the testimonies we have gathered show.

Transportation economy differs from the general economy in its dynamic, complex, and varying aspects. Because goods circulate in networks at differing speeds and over various distances, the sector is sometimes difficult to understand for an investor accustomed to carrying out linear reasoning as in industry.

On the other hand, on the stock market transportation companies are considered cyclical stocks. When economic conditions are good, they provide good returns for shareholders. However, they are also very sensitive to market downturns.

A cyclical and complex sector

The coronavirus pandemic has clearly shown this complexity in the transportation sector and its hypersensitivity to economic context.

Airlines' revenues have declined by 70% or more in 2020, and demand for air travel is not expected to return to pre-pandemic levels until the second half of the decade. Conversely, shipping companies, that have been struggling financially for many years, have achieved record profits.

Likewise, the growth of e-commerce generated by the pandemic has led to a dramatic increase in shipping volumes for companies such as UPS, FedEx, or DHL. We can speculate that e-commerce, after the pandemic, will remain vigorous. The revenues of transportation companies will therefore probably continue to grow, which could increase their attractiveness for investors.

Measuring the efficiency of road transportation companies

For several months now the road freight transportation sector has seen an increase in volumes, which has encouraged an increase in freight rates. According to the Upply database, road transportation prices on a European scale have increased by 3.2% since the start of the year. However, on a global scale, the sector is still penalized by the economic restrictions which are affecting the performances of companies. A study published by the IRU (International Road and Transport Union) estimates the losses for road freight transportation companies worldwide at $347 billion in 2021.

For investors, several criteria make it possible to better analyze the efficiency of a road transportation company.

  • Strict control of fixed costs: Transportation companies generally have high fixed costs, as it is a capital-intensive activity. The production of transportation involves capital (trucks, trailers, etc.), which the leaders know how to best optimize the use.
  • Control of energy expenditure: the sector is a large consumer of energy. The financial performance of transportation companies is linked to the price of crude oil. Reducing the carbon footprint and therefore the need for diesel and implementing a process of continuous improvement in energy efficiency are priorities for the top transportation companies.
  • For freight forwarders, the commercial margin, and the operating ratio (operating costs / turnover) are essential assessment criteria since they show whether transportation purchases and the organization are competitive or not.

Financing the modernization of road transport

The road freight transportation sector is a niche market for investment funds. In Europe, transactions in this sector represent only 1.8% of the assets held by funds.

However, this situation could change from the second half of 2021 if the economic recovery accelerates.

  • For investors, the sector represents a great investment opportunity, because it is undervalued but also particularly attractive if a rapid turnaround in the economic cycle can be anticipated. “We currently sense a very active market and increased competition which makes it more difficult to finalize transactions. Because the prices of companies remain reasonable, this attracts investment funds. Today, we have the valuation of transportation companies which exceeds the barrier of known multiples (5 to 6 times profits) with prospects for future increases. This will accelerate the consolidation and modernization of the sector", says Thibaud de Portzamparc, director of the Siparex investment fund.
  • For carriers, the use of financial engineering tools offered by investment funds can prove to be invaluable.Transportation companies need significant financial resources to buy the equipment they need. Many choose to finance these capital expenditures with long-term debt, but others turn to funders. Investment funds are also involved in several types of operations that are of particular interest to the well-being of SMEs: capital investment, acquisition, transfer, sale, and LBO. Beyond their purely financial role, funds can provide advisory services in the event of a business being transferred to or taken over by its senior executives.

The search for a critical size is the main element to launch an external growth operation which will require financing from banks or investment funds. In the case of road transportation, it will most often be a question of extending the territorial network, on a national or even European scale, but also of expanding the range of services through targeted acquisitions (refrigerated transportation, urban delivery, etc.). Investment funds have their role to play in strengthening capital and being true partners in the emergence of transportation leaders with extensive network and skills.

They are also potential players in energy transition. Changes in environmental standards require massive investments for fleet renewal and the transition to CNG / LNG, hydrogen, or electric engines. This movement stimulates funding needs and favors the regrouping of actors in search of large-scale economies.


  • Siparex and Jacky Perrenot

Siparex is one of leading independent French private equity groups, and one of the most active in road freight transportation. Its job is investing equity in companies so as to provide a growth dynamic. The group, which totals € 2.5 billion in assets under management, prides itself in having an active shareholder strategy without being interventionist. “When we invest as a minority shareholder, we are above all very attentive to the quality of the company's managers and the quality of their vision. We want to give them the means to implement and develop their strategy, " explains Thibaud de Portzamparc, director at Siparex.

The investment made in the Jacky Perrenot group provides a good example of the accelerator effect that an investment fund can have. “We were won over by this carrier, which already had the largest green fleet in Europe with 15% of trucks running on natural gas. We entered the capital in January 2020, allowing it to buy back more than 200 million euros in turnover in two years with the takeover of Le Calvez and that of VIR”. Jacky Perrenot is today one of the leading French players in road freight transportation with a turnover of nearly €900 million. It is based on a fine territorial network (82 sites) and has one of the largest European fleets (7,800 vehicles).

  • Arcole Industries and Girard Agediss

Arcole Industries is another well-known name in the transportation sector, but it is not an investment fund, insists Renaud Sueur, partner and Chairman of the Board of Arcole Industries. “It is a public limited company, the capital of which has been held by its management team and a collection of various shareholders since its creation. It invests with its own funds, which allows it to manage companies over the long term, without any obligation to sell”.

Arcole Industries specializes in struggling businesses. “Our commitment is pragmatic and concrete. We provide the human and financial resources necessary for recovery, improved performance, followed by the resumption of a solid development", indicates Renaud Sueur. “Arcole Industries seeks growth and profitability, based on an industrial project, which is deployed on the long term. We support our companies in particular by sharing best practices and providing specific support for the development of digitalization or the taking into account of ESG criteria (environmental, social and governance criteria, ed.)”.

The company has worked with the Girard Agediss group, a logistics specialist specializing in the transportation of furniture and bulky items to professionals and individuals. The group was placed in receivership in 2010 following the bankruptcy of CAMIF, one of its major clients. “In order to provide it with a sufficient financial base to regain the confidence of its various partners (suppliers, customers), Arcole Industries and the FCDE (Fund for the Consolidation and Development of Companies) have capitalized the Girard Agediss group to the tune of € 11 million. We have turned the company around by resizing the workforce to bring it into line with the level of activity, by implementing a pragmatic transportation plan and by reducing costs", says Renaud Sueur.

This action plan enabled the carrier to return to positive operating conditions within 15 months, then to resume growth by acquiring new customers and expanding its range of services. A high point came in 2015 as Girard Agediss once again became the French leader in the last-mile delivery of bulky products and furniture, with an annual turnover of nearly €70 million. In 2016, the company was sold to the 3SI Group (Mondial Relay, Dispeo, Mezzo) to enrich the range of services offered by the 3SI Group to e-merchants in France.

“We don't exclude the possibility for us to return to the world of transportation if the opportunity arises. We are actually present in a related manner with BENALU, which is the largest manufacturer of aluminum dumper trucks in France with a market share of over 50%”, specifies Renaud Sueur.

  • Waberer's and Mid Europa Partners

Olivier Van Houtte, Transition Manager, joined Waberer's as Director of Operations at the end of August 2019. The Hungarian transportation company, which is among the European leaders in the road transportation market, had been recording increasing losses for more than 3 years. The investment fund Mid Europa Partners (MEP), which owns more than 70% of the carrier's capital, had commissioned its company, Amadeus Executive, to help it drastically turn the situation around. In less than 18 months, following a complete overhaul of the organization and the business model, as well as a major restructuring plan, the company has returned to growth and profits.

The MEP fund began to "pull out" of the Hungarian company by selling part of its shares to another Hungarian-American fund, Indotek, but also especially to the former founder of the company, György Wáberer, who now holds 20% of the capital. "Contact with the MEP fund was very regular, at least weekly," says Olivier Van Houtte.

The turnaround began with a precise diagnosis of the situation. “Firstly, Waberer's had for years supported its rapid growth by using low production costs; but this competitive advantage has been undermined by competition from other Eastern European countries. Secondly, the economic model of a "Taxi" service, that is to say, consisting of allocating the batches to the lorry as close as possible to the place of loading without taking into account the point of delivery, generated significant additional costs due to the additional deadhead miles and the dispatch of the fleet to regions less suitable for reloading. Thirdly, organizations were structured in silos, sales and operations spoke little to each other,” explains Olivier Van Houtte.

Then in a second step, the action plan was rolled out. More than 1,000 trucks were taken out of the fleet. “Europe has been divided into regions or clusters, and the principle is to go back and forth between clusters. The work of sales and operations has been made easier and we have been able to find some margin points. All this could not have been done without the trust shown by MEP's partners who were monitoring the situation”, underlines Olivier Van Houtte.

Resorting to investment funds or financers other than banks may therefore be an option to consider, especially if consultancy is added to the purely financial considerations.

Authors: William Béguerie and David Thébault

Slowdown in investment fund activity in 2020

The 2020 recession slowed the business volume of private equity and venture capital funds. Private equity firms have invested €88 billion (-12%) in European companies and financed 8,100 companies, according to data from Investment Europe for the year 2020. On the other hand, “venture capital” investment funds' operations increased by 7% and reached €12 billion. Buyout investment transactions totaled €60 billion, 41% of which are concentrated on operations exceeding €300 million.

The recessionary economic context had a greater effect on “growth capital investment” operations, which reached €14 billion euros showing a sharp drop of 24%.

David Thebault

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William is a road transport expert for Upply. An innovator and entrepreneur at heart, he has successively worked in operational management in various sectors - chemical, automotive, building materials, both as a shipper and service provider. David is Head of Financial Market Solutions at Upply and has over 20 years experience in the financial sector. His area of expertise is finance and innovation, which he applies to the optimisation of the supply chain market.
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